Insider Brock University finance professor Ernest Biktimirov believes different locks must be opened with different keys. That’s how the Chinese proverb goes, anyway. Four years ago, Biktimirov, who recently won an Ontario teaching award for his innovations, was asked to instruct international students, the majority of them Mandarin-speaking, in corporate finance. Faced with both language and cultural barriers, the ol’ dog decided to try a new trick he’d been using on his English-speaking classes: teaching basic finance through the profound. Biktimirov found that proverbs — displayed in both English and Chinese characters via PowerPoint helped students grasp even the foggiest financial concepts. All it took was four Chinese proverb dictionaries and some ingenuity, and Biktimirov had a class full of smiling, engaged students — getting him out of both the frying pan and the fire, so to speak. Below are some of Biktimirov’s favourite Chinese proverbs (along with some he uses that we like) and lessons they bring to mind as we head into the Chinese New Year 4706, beginning Feb. 7.
If you are afraid of tigers and wolves, don’t live in the mountains.
English equivalent: If you can’t stand the heat, get out of the kitchen.
Risk tolerance: If an investment exceeds your risk tolerance, don’t undertake it.
It is no use crying over spilled milk.
English equivalent: Same.
Sunk cost: Don’t consider sunk costs in a capital budgeting decision — that money is already gone.
A phoenix cannot soar out of a chicken coop.
English equivalent: You can’t find gold in a coal mine.
Returns: High returns cannot be found among low-risk investments.
A malignant disease has to be treated with toxic medication.
English equivalent: Fight fire with fire.
Risk management: In some cases, risky securities, such as options or futures, can actually reduce the risk of a portfolio.
One who is not willing to risk his child will not catch the wolf.
English equivalent: Nothing ventured, nothing gained.
Risk-return trade-off: The greater the potential reward, the greater the risk.
Whether or not a dumpling is decently filled with meat cannot be judged from how well the decorative folds are made on the outside.
English equivalent: All that glitters is not gold.
Risk and reward: Don’t evaluate an investment based solely on its return or its risk — it is only attractive if it provides an adequate compensation for its risk.
When one dog barks at a shadow, a hundred bark at the sound.
English equivalent: The blind leading the blind.
Analysts’ forecasts: Although forecasts may look consistent, they could still be inaccurate if some analysts based theirs on the numbers of others instead of their own. This results in a forecast, really, by just one or two analysts — who may be wrong.
Don’t count your chickens before they are hatched.
English equivalent: Same
Forecasted numbers: Remember that forecasted numbers are only best estimates and should never be considered concrete.
Decayed wood cannot be carved
English equivalent: Garbage in, garbage out.
Quality of analysis: If the original numbers for the analysis were seriously in error than even a sophisticated analysis will produce grossly false conclusions.
Different locks must be opened with different keys
English equivalent: There is a time and a place for everything.
Different investments: Different situations call for different investments.
Ice frozen three feet thick does not form from one day’s coldness
English equivalent: Rome was not built in a day.
Financial goals and time: Achieving large financial goals may take longer.
While it’s hot strike the iron
English equivalent: The early bird catches the worm.
Prompt action: In efficient capital markets security prices adjust quickly to new information. Investors need to react quickly to new information as well, so they can have a better chance at receiving above-average returns.
Put your hand no further than your sleeve will reach.
English equivalent: Cut your coat according to your cloth.
Portfolio construction: Construct a portfolio according to its specific objectives and constraints.
Planning affairs lies with humans, accomplishing things lies with heaven.
English equivalent: Man proposes, God disposes.
Uncertainty: No matter how sophisticated the analysis, the total return always includes both expected and unexpected parts.
It is better to seek help from oneself than from outsiders.
English equivalent: If you would be well served, serve yourself.
Agency problem: Even though someone is hired to act on behalf of another person, her actions may not always be in the other person’s best interests.
Pick up the sesame seeds but overlook the watermelons
English equivalent: Penny wise and pound foolish.
Side effects: Side effects are relevant in capital budgeting decision.
Shoot two vultures with one arrow
English equivalent: Kill two birds with one stone.
Convertible bonds: Convertible bonds achieve two things simultaneously: the upward potential of stocks and the safety of bonds.